Design To Operate: Delivering The Goods With Better Logistics

Markus Rosemann

Part 4 in a 5-part series, “Design-to-Operate with the Digital Supply Chain

In this blog series, we’re looking at the design-to-operate (D2O) product lifecycle, which spans the phases of design, plan, manufacture, deliver, and operate. The first three installments focused on design (by Thomas Ohnemus), planning (by David Vallejo), and manufacturing (by Mike Lackey). My focus here will be on delivery and logistics.

The logistics question

The delivery phase of the D2O product lifecycle (aka logistics) can be boiled down to the following question: Where is my stuff and how is it doing? This question may seem simple, but in the context of today’s complex global supply chains, it is anything but.

Depending on who you are and where you stand, your stuff could be anywhere in the world and in any condition. Maybe it’s in the middle of the ocean on a container ship. Maybe it’s in the cart of an automated guided vehicle (AGV) making its way through a warehouse. Maybe it’s on a truck en route to one of your customers.

Whatever the case, we want to know where our stuff is at all times. Why? Much of it has to do with consumer expectations set by Amazon and other online retailers. Today, manufacturers in a B2B context expect the same – meaning real-time updates for every milestone our stuff hits on its route to its ultimate destination. We want to know when it is shipped, when it reaches a distribution center, when it gets on a new vehicle, and when it will be delivered.

We also want to know about the second part of the logistics question: How is my stuff doing? Was it loaded correctly? Is it being handled according to specifications? How are the materials holding up? Is the refrigerated vehicle where it’s traveling set to the right temperature? Answering these questions requires real-time monitoring and end-to-end process awareness.

Add to this picture a complex array of logistics partners needed to meet your transport needs. In addition to internal fleets, most organizations use carriers, freight forwarders, and logistics service providers (LSPs). All of these need to be coordinated in a seamless fashion.

Logistics can add up to 15% of the cost of the sale of a product. To keep this cost down, the name of the game is speed and efficiency. And let’s not forget that delivery is a vital piece of the puzzle when it comes to ensuring a positive customer experience. Few things can spoil a strong customer relationship like failure to deliver.

Integrated logistics

Logistics processes that are integrated into each phase of the D2O product lifecycle can help address many of the challenges discussed here. Let’s take a look:

  • Design: During product development, details regarding how the final product will be delivered can impact design decisions. For a simple toy packed in a box, the delivery considerations may be straightforward. But what if the product includes perishable or fragile items? Or what if the weight of the product is a factor? If so, perhaps design will switch from metal to plastic molds – or it might try 3D printing, which locates production closer to the end customer while also minimizing waste. Whatever the case, design and logistics teams need to coordinate and share information to make the right decisions.
  • Planning: The planning team intersects with logistics to make transportation plans that ensure the smooth flow of materials throughout the product lifecycle. In addition to transport sourcing, planning helps make decisions regarding logistics resources such as warehouse space, labor, or carrier capacity. Orders that feed the manufacturing process need to be consolidated, and materials required for manufacturing need to be staged in sequence. Planning can also play a role even after the sale has been made – as in the case of reverse logistics. In all cases, materials need to be tracked and traced and logistics processes orchestrated to avoid bottlenecks.
  • Manufacturing: Typically, for industries like mill or mining, production output is loaded directly on to rail cars or trucks. To avoid delays and bottlenecks regarding the smooth flow of materials, manufacturing and logistics need to be tightly integrated. This is particularly true when you’re committed to same-day shipping – in which case, logistics needs to get the product out of the door and en route to the customer within hours.
  • Operations: Finally, during the operation phase, logistics is needed to keep service parts flowing so that assets (either onsite or at the customer’s site) keep running. Speed and efficiency are important – as is the goal of keeping inventory levels as low as possible without leading to out-of-stock situations. At the same time, organizations are using predictive models to determine when parts need to be replaced – which means logistics needs to be integrated into these models in order to meet service levels.

Getting there with intelligent technologies

Integrating logistics into the D2O process is a good goal, but how can it be accomplished? Intelligent technologies can play a key role. Here are just a few examples:

  • IoT: When it comes to track and trace, IoT sensors play a key role in helping your logistics team understand where your stuff is and how it’s doing. Sensors can measure and communicate location, temperature, moisture, altitude, pressure, weather conditions – whatever you need to know.
  • Blockchain: Data from logistics material and product movements can be captured in blockchain ledgers to provide irrefutable proof of the chain of custody for any goods or materials in transit. If compliance and transparency are a concern – as with pharmaceuticals or other controlled substances – then blockchain may be the answer.
  • Networks: Aligning distribution and fulfillment processes with partners such as shippers, consignees, freight forwarders, LSPs, or carriers is important in highly collaborative logistics environments. To manage this alignment, companies need a network of business partners, creating visibility and frictionless collaboration.
  • Machine learning: Charting new delivery routes, optimizing AGV traffic in the warehouse, improving carrier selection, and enabling onboard system interfaces with natural language processing. These are just some of the areas in which machine learning can help improve efficiency and effectiveness for logistics processes.

Learn more

Logistics is a critical concern that runs through many of the activities involved in the D2O product lifecycle. At the same time, information from these other phases can act as important inputs for consideration by logistics teams. With integrated D2O processes in place, your logistics team can improve performance and ensure that goods are delivered on time at the lowest cost possible – ultimately helping you deliver the kinds of experiences customers expect.

Stay tuned for the next installment in this series, where we focus on the operations phase. In the meantime, if you need more information on the D2O product lifecycle, have a look at the new white paper from IDC.

Markus Rosemann

About Markus Rosemann

Markus Rosemann is Global Vice President for Digital Logistics and Order Fulfillment at SAP SE, based in Walldorf, Germany. Markus is responsible for the global solution strategy and go-to-market of SAP’s logistics solutions, an important building block of SAP’s Digital Supply Chain solutions. He works with customers, thought leaders and partners on building solutions for the line of business logistics, covering transportation, warehousing, and the logistics network including track & trace. Markus joined SAP in 1997 and successfully introduced solutions to the market for Supply Chain Execution as well as for Project, Portfolio and Innovation Management.